Medicare Levy

Usually in March the federal government delivers the budget and announces what changes there will be to tax scales for the coming tax year(s).

In early to mid June the ATO publishes "Final" tax scales for the following tax year on the software developer's website.

As soon as they are published, Megabus imports the new tax scales into a Marlin HR update that is released to customers before 30 June.

The update is downloaded automatically and customers are prompted to install it.

After completing the Marlin HR EOFY close-off, opening the payrun screen will automatically install the new tax scales.

Do the tax tables in Marlin HR include the basic Medicare Levy?

In Employee Maintenance you select the appropriate tax scale for each employee based upon the information they provided on their TFN Declaration Form (i.e. whether they are an Australian or Foreign Resident for the purposes of taxation in Australia, whether they wish to claim the tax free threshold or have a student support loan to be repaid etc).

The tax tables that are relevant to employees that are entitled to medicare benefits include the full basic medicare levy.

Examples are: Tax Free Threshold, No Tax Free Threshold, Tax Free Threshold + STSL Debt, No Tax Free Threshold + STSL Debt.

Those tax tables applicable to employees that are not entitled to medicare benefits do not include the basic medicare levy.

Examples include: Foreign Residents, Foreign Residents - No TFN, Foreign Residents + STSL Debt

Tax tables applicable to employees that have been granted a Half Medicare Exemption or Full Medicare Exemption remove half or all of the basic medicare levy.

Examples include: Full Medicare Exemption, Full Medicare Exemption + STSL Debt, Half Medicare Exemption, Half Medicare Exemption + STSL Debt.

How can I confirm whether the tax scales include the basic medicare levy?

In Marlin HR, if you select the normal Tax Free Threshold tax table for an employee in Employee Maintenance (on the General tab) as shown below, the employee will be taxed at the normal rates (which automatically include the basic medicare levy).

To see what those rates are, select System > Tax Scales from the menu, then double-click on the Tax Free Threshold table, it will show you the tax rates used for each salary band (these rates include the basic medicare levy). Note that for the $721 to $865 range the rate used is 21.9% (Factor A column).

As a comparison, if you now double-click on the Full Medicare Exemption table, and look at the tax rates used for the same $721 to $865 range, you will see that the rate used for employees with this table selected is only 19.9% because the basic medicare levy of 2% has been removed.

This is also demonstrated in the maximum rate that must be applied for employees that have not supplied you with a TFN Declaration. For Australian residents the maximum rate is 47% (which includes the basic medicare levy) but for Foreign residents it is only 45% because they are not entitled to medicare benefits and therefore don't pay the basic medicare levy (i.e. it is not included in the Foreign Residents tax table).

So, in summary, the rates in the regular tax tables (eg. Tax Free Threshold, No Tax Free Threshold, Tax Free Threshold + STSL Debt, No Tax Free Threshold + STSL Debt) already include the basic medicare levy because the employees using these tax scales are entitled to medicare and therefore must pay for it. However, the rates in the tables used for employees that are either not entitled to medicare benefits or have been granted a half or full medicare exemption, have half or all of the basic medicare levy removed (e.g. Foreign Residents, Full Medicare Exemption, Half Medicare Exemption, etc).

Do the tax scales include the medicare levy surcharge?

The surcharge is only applicable to employees earning over a certain amount for the year or who have not had private patient hospital health insurance cover for the full year.

For these reasons, the assessment as to whether an employee is subject to a surcharge is made as part of the tax return process and amounts to cover this are not automatically withheld by the employer.

If an employee believes they may have to pay additional tax at the end of the tax year, they can ask their employer to withhold additional tax each pay as a deduction.